What is an Invoice and how to prepare one?

If you are a seller, you might often come across the term “Invoice”. If you are still unaware of it or have an iota of doubt on this topic, read on to know more.

What is an Invoice?

• An Invoice is a document that is given by the seller to the buyer, as a legal and formal way of requesting for payment in lieu of the products and/or services rendered to the Buyer. 
• It primarily contains the list of items being sold along with the price of each item. 
• This document acts as a formal and legally binding way of asking for payment and can hold good in case of any dispute on any payment dues or terms of service since it acts as a proof that the customer was notified on the request for payment. 
• Having said that, the more important purpose of using Invoice is for tracking the payments made for the goods and services sold.

What should be present in an Invoice?

For a document to be qualified as a formal Invoice, It should contain the following basic details:

• The Name “Invoice” is on top of the document.

• A Unique reference number, also known as the Invoice Number. It should be unique so that you can track it properly in your CRM or ERP.

• Date the invoice was generated or sent to the customer.

• Date of sales or the time period in which the service was provided to the customer.

• Name and Contact information of the Buyer

• Name and Contact information of the Seller.

• Line-wise listing of product items or services sold to the customer.

• Per unit cost of each line item being sold to the customer.

• It should mention any applicable discount on each line item or can be present at the end.

• It should mention the applicable Tax on the sales of goods or services as per the applicable local laws governing the business. Check out our free India GST calculator tool if you wish to calculate GST.

• And finally, it should mention the Total Amount to be paid by the Buyer.

• Additionally, you may want to include your company logo on it (the Seller Company’s logo) to make it look more appealing, it helps in your branding as well.

Check out the sample Invoice document:

Invoice Sample

What is the difference between Sales Invoice and Purchase Invoice?

Sales Invoice: From the Perspective of the Seller, the invoice listing the products and/or services being sold is called a Sales Invoice.

Purchase Invoice: From the Perspective of the Buyer, the invoice listing the products and/or services which he purchased is called Purchase Invoice from his reference.

How can you send invoices to your Customers?

If you are a Seller, you might be required to send the Invoice to your customers. If the number of invoices you send usually is less and can be managed manually, then you can manually type it in a Word document in a pre-defined template and send it to your customer.

However, if you are in a growth stage and want to scale up, you should definitely use a CRM, ERP, or Accounting software that can help you with an auto-generated invoice, so that it would be easier for you to organize loads of invoices, track the payments better and reduce any manual errors.

How to generate an Invoice instantly online?

If you want to generate an Invoice online instantly. You may check out our free tool for generating invoices instantly. You can generate invoices without the need to log in.

Tool: Online Invoice Generator

I hope you found this article useful. Let us know with your comments.